The Reserve Bank’s hawkish outlook on economic conditions and OCR projections for 2023 highlight a prime buying opportunity for Auckland businesses with robust cashflows searching for mixed-use city fringe properties early next year.
Investors, already finding suitable investment options a challenge in a rising interest rate environment, are indicating a wait-and-see approach at the beginning of 2023, pausing for additional indications of market stability in mid to late 2023 before progressing with their investment plans.
Colliers Directors Chris Dibble and Jonathan Lynch believe this provides an ideal time for astute owner-occupiers to enter the fray who were often squeezed out of contention in the market highs of 2020 and 2021.
Dibble, Director of Strategic Advisory at Colliers, notes that it is often the case that businesses with evidence of robust cashflows and a positive trading outlook can secure lending for commercial property more readily than property investors.
Start your property search
“While both an investor and a business will be subject to high levels of scrutiny on affordability, a profitable business with a solid historical performance and steady cashflow outlook can often provide the appropriate level of comfort banks require when assessing the loan application and security requirements,” Dibble says.
“The occupiers also have the ability to reduce their rental expenses and potentially insulate themselves from rising rental costs in the future, which could offset some of the increase in cashflow requirements to service the mortgage.
“While we expect a high degree of cautiousness amongst businesses as they prepare for a potential recession from mid-2023 and into early 2024, there are businesses feeling positive about their own activity ahead.
“It is often the case that with the right view on financials and getting to understand a business’ mid to long-term goals that we can strategically advise a positive way forward in unlocking equity for a property purchase.”
The latest Institute of Directors and ASB Director Sentiment Survey report highlighted 50.3 per cent of respondents expecting the performance of their organisation to improve, despite 68.1 per cent expecting the New Zealand economy to decline in the next 12 months.
“With overall purchaser demand levels lowering and limited good quality stock on offer that remains tightly held, conditions are aligning for these businesses to ramp up investment decisions and utilise any surplus equity wisely given the abundant opportunity to purchase with less competition present in the marketplace,” Dibble says.
“We are already starting to see a handful of these deals take place.”
Lynch, Director of Investment Sales at Colliers specialising in mixed-use assets in Auckland’s city fringe, says owner-occupier enquiry has picked up while investor enquiry has taken a breather.
“We recently sold a highly specialised, bespoke office space with basement parking at 27 Nugent Street in Grafton for $6.8 million to an owner-occupier looking to take advantage of market conditions,” Lynch says.
“A beautiful character villa in Ponsonby that was suitable for a vast array of users was recently sold to a medical-based occupier for $5.3 million.”
Lynch also notes that owner-occupiers won’t have it all their way, with investors still pursuing high quality, well-positioned opportunities.
“We have fielded a lot of enquiries recently for buildings around the CBD fringe and strata offices, which would typically be snapped up by owner-occupiers but have sold to investors. These include properties at 109 Queen Street and 12 O’Connell Street that provided investors with potentially very solid future returns or close to 7 per cent contract yields.”
- Article supplied by Colliers
